SARS warning to taxpayers on fraudulent tax returns

No shortcuts to tax refunds

Pretoria 15 October 2013 –SARS wants to appeal to all taxpayers to exercise caution if they are approached by “tax advisors” who guarantee them a tax refund on submission of their income tax returns. Anyone who guarantees a taxpayer a tax refund may be misleading them and should be avoided.

SARS has seen an increase in fraud cases involving personal income tax returns where “tax consultants” or intermediaries, having promised clients substantial tax refunds (in return for a ‘cut’ of up to 50% of the refund) submit fraudulent tax returns on behalf of the taxpayer to SARS. The activities of suspected syndicates are particularly prevalent at this time as the deadline of 22 November 2013 approaches for the 2013 Tax Season.

On 5 September 2013 SARS, with the assistance of the SAPS, conducted raids in Mpumalanga which resulted in the arrests of 28 people who had submitted fraudulent income tax returns on behalf of at least 200 individuals, on the understanding that they would keep a percentage of the fraudulent refund generated. These were private individuals who were involved in an income tax fraud syndicate, which aimed to defraud SARS – and thus the South African public – by submitting fraudulent tax claims and pocketing all or some of the money. It is possible that the arrested individuals were tax practitioners or were masquerading as such. The total amount of fraudulent claims in these cases is just over R7 million.

In these cases taxpayers were persuaded by the suspected fraudsters to hand over personal information like bank account numbers, their log-on details and passwords for eFiling so that revised tax returns could be submitted on behalf of the taxpayer and fraudulent refunds claimed. While the criminal prosecutions against the 28 individuals will be pursued before court, SARS is also in the process of taking civil actions to recover fraudulent refunds from the taxpayers involved.

The case of Mr Lusindiso “Maxwell” Mhlwatika, a tax practitioner, is currently being heard in the East London Regional Court. Arrested in 2010, Mr Mhlwatika fraudulently claimed tax refunds for various public sector employees who he approached. He allegedly did this by submitting fraudulent tax returns on their behalf, claiming that they were entitled to tax deductions for, among other things, working abroad, working from home and having disabilities or medical expenses. He is alleged to have charged individual taxpayers between R400 and R1100 in fees, in return for which he used their eFiling usernames and passwords to submit the fraudulent returns. He faces 290 counts of fraud and 145 counts of fraudulent tax assessments for evasion. The monetary loss to the fiscus was approximately R1.5 million.

On 10 October 2013, SARS and the SAPS conducted a search and seizure for evidence-gathering purposes in Bushbuckridge. The search focused on collecting both documentary and electronic evidence for an investigation into a fraudulent tax refund syndicate. The suspects are alleged to have filed fraudulent claims on behalf of taxpayers and obtained between 15% and 30% of each of the refunds claimed. It is thought that hundreds of taxpayers were conned by the syndicate into providing their taxpayer information in return for a tax refund to which they were never entitled.

Many qualified and registered tax practitioners offer important services to taxpayers by assisting them with their tax affairs and with submitting tax returns to SARS. Unfortunately, a minority of those might be dishonest. Additionally, some individuals pretend to be tax practitioners with the intention of defrauding SARS and the unknowing taxpayer.

SARS urges taxpayers not to fall for conmen who promise them guaranteed tax refunds. The only way a refund can be “guaranteed” upfront is if fraudulent information is submitted in a tax return. This places the taxpayer at serious risk of being arrested for fraud – because taxpayers are ultimately responsible for tax returns submitted in their name, even if by third parties.

If a taxpayer is unsure about how to submit their tax return there are a number of options available to them by SARS:

Those who are registered for eFiling can make use of the Help-You-eFile function on the eFiling website. This allows them to be in direct contact with a SARS Call Centre agent while they complete their tax return online. With permission from the taxpayer, the facility enables the Call Centre agent to access the taxpayer’s eFiling browsing session at the same time as the taxpayer and to see exactly what the taxpayer is seeing.

Taxpayers who are not able to use eFiling or who do not feel confident in doing so can visit any SARS branch, with all the relevant documents, and a SARS official will submit their tax return electronically on their behalf and free of charge.

While SARS understands the attraction of an offer of a tax refund for which the taxpayer does not have to do anything, the reality is that these offers are all “too good to be true” and will certainly result in difficulties for the taxpayer, as well as for the fraudster who submitted their tax return.